Europe: A worldwide player
11/01/1998
Europe: A worldwide player
Bob Mariner, VLSI Research Inc., Bedford, UK
The European semiconductor industry was riding on the crest of a wave during the first half of 1998, but with the worldwide semiconductor downturn, the European industry has fallen as well. The most visible indication of this is the announced closure of Siemens` new flagship wafer fab in North Tyneside, UK. Despite this shutdown, the fundamentals are still looking good for European companies. Over the last few years, they have been experiencing strong growth and gaining market share in the manufacture of both semiconductor components and production equipment. These companies have evolved from national businesses into truly global entities.
Within the European semiconductor industry, it has long been recognized that survival depends upon competing worldwide. This has been a particularly important factor in the success of European production equipment manufacturers. These companies have not had the soft-option of surviving on business from local customers, but have had to develop leadership strategies for supporting their products globally. As a result, they are now beating both the Japanese and the Americans in customer satisfaction.
Technologically, Europe is at the leading edge of key growth businesses in electronics that will support the long-term growth of its semiconductor industry. The most visible gain within the European electronics industry has been to establish internationally viable standards such as the Groupe Speciale Mobile (GSM) digital cellular phone system. The worldwide acceptance of GSM has benefited the industry tremendously - not only the handset and infrastructure manufacturers such as Ericsson, Nokia, Siemens, Philips, and GPT, but also the European semiconductor manufacturers who provide the components. Europe also has core strengths in automotive electronics, smart cards, and consumer goods, which together make the continent a leader in mixed signal semiconductor design and production. These strengths benefit the semiconductor companies, as well as the many independent design houses that support them.
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These European electronics market strengths are helping the indigenous European semiconductor companies to maintain their world rankings for semiconductor suppliers. Philips, STMicroelectronics (SGS-Thomson), and Siemens now take positions 11 through 13 and are expected to move up over the next two years. Weakening computer markets and the related falling DRAM prices are helping Philips and STM gain overall market share, although Siemens still remains exposed to the DRAM pressures. As the world moves more and more to the communications age and away from dependence on PCs, these companies have an opportunity to gain further market share.
The capital equipment market is still dominated by the American Silicon Valley companies. They have had the benefit over the years of being in the middle of the semiconductor revolution. Their local customers dominate the industry, and the ease of communications and cross-fertilization of ideas has enabled these vendors to keep at the top of the technology ladder. That dominance is now being challenged by a number of European equipment manufacturers, however. ASM Lithography, ESEC, and Fico are the most notable examples, but there are now many others that stand out with world-class technology in their own fields. These companies may have started as small local suppliers, but have learned to solve the problems of worldwide customer service as well as provide leadership technology. Over the past few years, European equipment manufacturers have gained an increasing share of the 10-BEST awards in VLSI Research Inc.`s Customer Satisfaction Survey (see table). This year they jumped from a 14% share to a 24% share of the total awards and took many of the top positions. Most notably, they have taken 50% of the 10 BEST awards for assembly equipment.
We must consider whether the European semiconductor industry can grow to take a share of the world market that is more comparable to that of the US in terms of the region`s relative gross domestic product (GDP). Although both Europe and North America each account for just over 30% of the world`s GDP, European companies produce only 9% of the world`s semiconductor components. The globalization of all major companies continues to blur such national distinctions, and the important issue for Europe is to have a strong semiconductor industry providing the technological cornerstone for future industrial strength. It is more important to have the technological skills within Europe to develop, design, and manufacture, than having such capability European-owned. Nevertheless, strong European ownership adds balance and security to the equation.
Europe is ideally positioned for the industry recovery when it comes. LG Semicon`s fab in South Wales and Hyundai`s in Scotland are ready to be fitted out with the latest processing capability as soon as demand starts to rise. This will place Europe further up the technology ladder than it might otherwise have been, and will help to pull the region out of recession earlier than those with older facilities. The net long-term effect will be to further increase Europe`s share of world production.
Bob Mariner is principal at VLSI Research Inc., 3 Ison Close, Biddenham, Bedford MK40 4BH, UK; ph 44/1234-210215, email [email protected].